Question $1$ The following information about two mutually exclusive projects R and S are relevant for requirements for questions $1$a$1$c$.$ Max$-$W Company is considering investing in Project R$,$ which will require an outlay of $$900$ million. The project will have a four$-$year life and at the end of that time, the equipment will be scrapped. The project is expected to generate the following annual cash flows: Question $1$ investment opportunities Year$-1$ Year$-2$ Year$-3$ Year$-4$ Cash inflows $$690$m $$590$m $$570$m $$480$m Cash outflows $$280$m $$220$m $$220$m $$200$m The company has a required rate of return of $9\mathrm{.}09\%.$ The company normally has two$-$year payback criteria. The alternative project$-$S offers the following net cash flows: Year$-0($$$900$m$)$; Year$-1$ $$254$m; Year$-2$ $$319$m; Year$-3$ $$447$m and Year$-4$ $$499$m$.$ Calculate the: NPV IRR PVI Payback period Discounted payback period for projects R and S$.$ Calculate the crossover rate $($between projects R and S$)$ based on the cash flow data mentioned above. Show the range of required rates for which either project$-$R or project$-$S would be preferred. Based on your findings in requirements a and b above, what would be the decision of selection of project $($when the required rate of return is $9\mathrm{.}09$ percent$)?$ Question $2$ The following information relating to an investment in equipment has been extracted from the books of CB Ltd Ltd$.$ The total purchase price is $$61,982$; the salvage value is $$8,610$ at the end of year $3.$ Net sales revenue $($relating to the equipment$)$: Year$-1$ $$34,000$; Year$-2$ $$28,000$ and Year$-3$ $$23,000$; applicable tax rate is $32\%$; and the required rate of return is $11\%.$ If the depreciation rate is $23\%$ straight line, calculate the tax amount in the third year relating to the sale of the equipment only. Question $3$ Using relevant data provided about the Antibacterial Soap Project below, prepare a cash flow table, using the Excel formulas as explained in $6\mathrm{.}2$ Asset replacement and calculate the NPV$,$ IRR, PVI, and discounted payback period. AB$-$CLEAN Ltd is planning to invest in a new antibacterial soap $($AB$99)$ project that requires equipment with a purchase price of $$96,000.$ The installation cost of $$5,000$ for the soap$-$producing equipment would be paid by the supplier. The transportation cost for the equipment would be $$4,000.$ The machine will have an economic life of six years and would be depreciated at $14$ percent straight line for the tax purpose. The salvage value of the equipment is estimated to be $$16,000$ at the end of the project life. Starting production with this machine requires an additional investment of $$32,000$ in inventory and $$13,000$ in accounts receivable. Whereas, there would be additional accounts payable of $$24,000.$ In order to analyse the effectiveness of the AB$99$ soap to kill germs, the management has spent $$12,000$ for clinical tests. The tests revealed that the AB$99$ soap uses harmful chemicals $($triclosoan and triclorcarbon$)$ as the main ingredients and these can be linked to health hazards and environmental damage. Despite the adverse outcomes of the tests, the management has decided to go for production. Expected sales in the first year would be $$98,000.$ Sales are expected to grow at $21\%$ in each year until the $6$th year. Costs have been estimated to be $42$ percent of sales revenue. In addition, there would be an annual fixed overhead cost of $$7,848.$ If the project is started, the regular annual net earnings of $$7,000$ of the company from the same production facility would be stopped. This new project will increase the annual interest expense from $$7,000$ to $$9,200.$ Whereas, due to the start of the project, annual sales of the company's body wash will increase by $$16,000$ in the first year and that increased sales will further grow by $13$ percent in each year until the $6$th year. The cost of sale for the body wash products is $40$ percent. The applicable corporate tax rate would be $34$ percent. The cost of capital is estimated to be either $10\mathrm{.}83$ percent or $15\mathrm{.}37$ percent. The management has targeted a discounted payback period of four years. What would be your decision about this project at $10\mathrm{.}83$ and $15\mathrm{.}37$ percent costs of capital? What would be your comment in recommending this project considering qualitative factors?